Lees Solicitors - Renewal of Business Leases - advice for Landlords and Tenants - Amanda Cucchi

Commercial Property News

Renewal of Business Leases - advice for Landlords and Tenants - Amanda Cucchi


Renewal of Business Leases - advice for Landlords and Tenants - Amanda Cucchi

Following on from my last article entitled " ‘Contract Out' to prevent lease renewal" I will now discuss the new procedures following the Regulatory Reform Order 2003, where a lease does entitle a tenant to renew at the end of the term and what the procedures are for renewal.

Once again, there are strict procedures to be followed under the Landlord and Tenant Act 1954 and different procedures will apply depending upon whether it the landlord or the tenant initiating the renewal.

Procedures where a landlord is initiating renewal

A Landlord must serve a notice upon the tenant known as a ‘Section 25 Notice'. This title is inspiringly derived from the corresponding section of the Act. The notice must be served in accordance with strict time limits and setting out the landlord's proposals for a new lease. These proposals are available for discussion and negotiation, but the notice will state that in the event the parties cannot agree the terms of the new lease, then either of the parties can make an application to the court to ask the court to settle the terms. This could be a costly course of action, however, and so the parties would be wise to keep the negotiations amicable.


Once a tenant receives a Section 25 notice then it is imperative that he seek the advice of his solicitor immediately, although he is not required to serve any form of counter-notice upon his landlord.

Procedures where a tenant is initiating renewal

A tenant must serve a notice upon the landlord known as a ‘Section 26 Notice'. Again, this title is derived from the corresponding section of the Act. The notice must be served in accordance with strict time limits and setting out the tenant's proposals for a new lease. A similar process to the landlord's notice applies in that the proposals are available for discussion and negotiation but, in the event the parties cannot agree the terms of the new lease, then either of the parties can make an application to the court to ask the court to settle the terms.

Again, when a landlord receives a Section 26 Notice, he should immediately seek the advice of his solicitor as, if the landlord wishes to oppose the new tenancy, he must serve a counter-notice within two months after the tenant's request.


Why was the original procedure changed?

The new renewal procedures were largely welcomed due to the fact that they abolished the requirement to make an automatic court application once a landlord or a tenant had received their respective section 26 or 25 notice. If the parties were amicable and could agree new terms between themselves, then an obligatory court application was unnecessarily long winded, cumbersome and expensive. The extremely strict time limits which were imposed by the courts often were not adhered to and could leave the tenant without the new lease he required, purely due to a failure to follow procedure.

However, it has been discovered that there are, in practice, a few problems with the new procedures as follows:-

  • A landlord is not required to set out its proposals for the duration of the tenancy in the section 25 notice. This leaves the courts to determine the length of the term as well as the other terms of the lease. The same would also be preferably to apply to section 26 notices.
  • As the tenant no longer has to give a counter-notice stating whether or not it is willing to give up possession, landlords do not receive any indication of whether the tenant is intending to vacate, leaving landlords in difficulty in making new lease arrangements for the property.

Due to the strict procedures which need to be followed by landlords and tenants upon receipt of a section 25 or section 26 notice then landlords and tenants should immediately seek advice from a solicitor when they receive such a notice, or indeed before they intend to serve such a notice to ensure it is served in the correct form. The solicitors in our Business & Property Services Department are all able to assist. If you have any queries then please contact me, Amanda Cucchi, on 0151 625 9364. Alternatively, if you require assistance on a matter where a court application has been made or is about to be made, please contact Mark Broughton in our Property Litigation Team on 0151 342 0269.

Amanda Cucchi

 

This article provides a summary of a recent case/change in law/news item. It is intended for general information purposes only and is not to be relied upon. It does not constitute legal advice and should not be treated under any circumstances as a substitute for legal advice. Lees Solicitors LLP does not accept any responsibility for any loss that may arise from reliance upon the information contained within this article. The copyright in this article is owned by Lees Solicitors LLP and permission must be sought before reproduction or publishing.


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